T.C. Memo. 1997-70
UNITED STATES TAX COURT
LUCKY STORES, INC., AND SUBSIDIARIES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent*
Docket No. 4446-93. Filed February 10, 1997.
P filed a Motion for Reconsideration of our Opinion
reported as Lucky Stores, Inc., & Subs. v. Commissioner, 107
T.C. 1 (1996) on the grounds that we failed to take into
consideration R's long-standing administrative practice of
applying Rev. Rul. 76-28, 1976-1 C.B. 106, to multiemployer
defined benefit plans, and that R failed to fully and fairly
apprise the Court of respondent's actual practices and
interpretations in this regard. In addition, P filed two
Motions Requesting Judicial Notice. Held: P's Motion for
Reconsideration and Motions Requesting Judicial Notice will
be denied.
*
This opinion supplements our previously filed Opinion in
Lucky Stores, Inc., & Subs. v. Commissioner, 107 T.C. 1 (1996).
- 2 -
Paul J. Sax, Richard E.V. Harris, and Richard A.
Gilbert, for petitioner.
Alan Summers, Kevin G. Croke, and Elizabeth L. Groenewegen,
for respondent.
SUPPLEMENTAL MEMORANDUM OPINION
NIMS, Judge: In a timely filed Motion for Reconsideration
(Motion) pursuant to Rule 161, petitioner requests the Court to
reconsider its Opinion reported as Lucky Stores, Inc., & Subs. v.
Commissioner, 107 T.C. 1 (1996). The Opinion is incorporated
herein by this reference.
Except where otherwise noted, all Rule references are to the
Tax Court Rules of Practice and Procedure. All section
references are to sections of the Internal Revenue Code in effect
for the years in issue.
Reconsideration under Rule 161 serves the limited purpose of
correcting substantial errors of fact or law, and allows the
introduction of newly discovered evidence that the moving party
could not have introduced, by the exercise of due diligence, in
the prior proceeding. Westbrook v. Commissioner, 68 F.3d 868,
879-880 (5th Cir. 1995), affg. per curiam T.C. Memo. 1993-634;
see Estate of Scanlan v. Commissioner, T.C. Memo. 1996-414. The
granting of a motion for reconsideration rests with the
discretion of the Court, and we usually do not exercise our
discretion in the absence of a showing of unusual circumstances
- 3 -
or substantial error. CWT Farms, Inc. v. Commissioner, 79 T.C.
1054, 1057 (1982), affd. 755 F.2d 790 (11th Cir. 1985).
Petitioner's Motion and related filings do not show any unusual
circumstances or substantial error with respect to our Opinion.
In our Opinion, we held that petitioner may not deduct in a
single taxable year contributions to 29 collectively bargained
defined benefit plans made over a period of 20 (in some cases 19)
months. In the Motion petitioner alleges that the Court erred in
that this holding contradicts 20 years of administrative practice
that applied Rev. Rul. 76-28, 1976-1 C.B. 106, to multiemployer
defined benefit plans. Petitioner's Motion also alleges that
respondent's counsel misled the Court by not bringing to the
Court's attention the history of respondent's actual practices
and interpretations in this area.
In addition to the Motion, petitioner has also filed a
Motion Requesting Judicial Notice and a Second Motion Requesting
Judicial Notice (collectively Judicial Notice Motions) supported
by two "Declarations" under penalty of perjury by Richard E.V.
Harris, to which are attached numerous exhibits. The
Declarations and attached exhibits have also been filed, and thus
become a part of the record. They are accordingly referred to in
this Supplemental Memorandum Opinion to the extent we deem it
necessary to do so to address arguments contained in petitioner's
Motion and Judicial Notice Motions.
- 4 -
Rule 201(f) of the Federal Rules of Evidence provides that
judicial notice may be taken at any stage of the proceeding.
Petitioner's Judicial Notice Motions will be denied in this case,
however, because their many paragraphs constitute nothing more
than a hodgepodge of argument and statements with respect to the
alleged action or inaction of respondent's counsel, of other
taxpayers, and of Congress, and with respect to collectively
bargained multiemployer pension plans.
Unfortunately for petitioner's position is the overlooked
central fact that section 404(a)(6), from which the disputed
administrative pronouncements have flowed, is a timing provision,
not a free-standing substantive provision intended to override
other deduction provisions of section 404(a). Section 404 is
entitled "DEDUCTION FOR CONTRIBUTIONS OF AN EMPLOYER TO AN
EMPLOYEES' TRUST". Section 404(a)(6) is entitled "Time when
contributions deemed made" (emphasis added).
The private rulings attached to petitioner's various filings
all uniformly hold that post-yearend contributions (grace period
contributions) to a qualified employees' benefit plan (including
in some cases multiemployer plans), if made within the parameters
spelled out in section 404(a)(6), may be deducted in the prior
year, but only if they fall within the deduction limitations of
section 404(a) and related subsections. Since petitioner's
Motion and the Judicial Notice Motions never address this all-
important proviso, petitioner's claim, even if correct, that
- 5 -
respondent failed to alert the Court to the existence of
multiemployer plan private rulings becomes wholly irrelevant.
The documents submitted with petitioner's Motion and
Judicial Notice Motions themselves belie petitioner's argument
that the result reached in our Opinion is at odds with
respondent's long-standing administrative practice. This is
amply illustrated by the following quotations:
[1.] The rules contained in Rev. Rul. 76-28 regarding
the application of Code section 404(a)(6) are related only
to the timing of contributions for deduction purposes.
* * * Corporation M is entitled to claim a deduction for
such [1979] contribution to the extent the deduction does
not exceed the maximum deductible contribution for 1978.
[Priv. Ltr. Rul. 7945115, (Aug. 8, 1979); emphasis added.]
[2.] You state that Corporation M makes contributions
within the deduction limits imposed by section 404(a)(1) and
404(a)(7) of the Code * * *. We conclude * * * that * * *
Corporation M may deduct for 1979 and later taxable years
under section 404(a)(1) and section 404(a)(6) of the Code
contributions not in excess of the limits of section
404(a)(1) and section 404(a)(7) * * *. [Priv. Ltr. Rul.
8010123 (Dec. 17, 1979); emphasis added.]
[3.] While the deductions also must come within the
limitations of I.R.C. section 404(a), it is clear that those
limits were not exceeded by the taxpayer. [Submission
of a law firm in support of a ruling request; emphasis
added.]
[4.] This ruling does not consider the actual amounts
deductible for the 1977 taxable year. Undated Technical
Advice Memorandum ruling involving years 1977-1978.
[5.] The total amount that may be deducted, however,
is limited by the dollar amount determined under
section 404(a)(1)(A) of the Code. [Tech. Adv. Mem. 8714008
(Dec. 17, 1986).]
[6.] In addition, the principles of Rev. Rul. 76-28,
regarding the application of section 404(a)(6), are related
only to the timing of contributions for deduction purposes
- 6 -
and do not affect the computation of the plan's deductible
limit under section 404(a). [Tech. Adv. Mem. 8714008 (Dec.
17, 1986); emphasis added.]
[7.] However, the principles contained in Rev. Rul.
76-28 regarding the application of section 404(a)(6) are
related only to the timing of contributions for deduction
purposes and do not affect the computation of the plan's
deductible limit under section 404(a). [Tech. Adv. Mem.
8543002 (April 30, 1985); emphasis added.]
In short, the materials proffered by petitioner, to support
its argument that the Court's Opinion is inconsistent with
respondent's long-standing administrative position regarding
section 404(a)(6) and Rev. Rul. 76-28, in fact wholly support the
rationale of our Opinion and the result reached therein. In this
connection, it may also be useful to note that in our Opinion we
pointed out that Technical Advice Memorandum 8210014, upon which
petitioner so strongly relied, itself flatly states that "this
ruling does not consider the actual amounts deductible for the *
* * [relevant] taxable year". Lucky Stores, Inc. & Subs. v.
Commissioner, 107 T.C. at 16. In all of its moving papers,
petitioner simply ignores these constantly repeated caveats, so
it is difficult to give credence to petitioner's insistence that
the Court has disregarded long-standing administrative practice.
Deduction limitations and petitioner's failure to come within
them are at the focal point of our Opinion.
Even in the absence of the foregoing, as we stated in our
Opinion, revenue rulings are not ordinarily precedential in this
Court. Id. at 13 (citing Gordon v. Commissioner, 88 T.C. 630,
- 7 -
635 (1987)). Moreover, unless the Secretary establishes
otherwise by regulations, a "written determination" may not be
used or cited as precedent by another taxpayer. Sec. 6110(j)(3);
sec. 301.6110-7(b), Proced. & Admin. Regs. Written
determinations include both private rulings and technical advice
memoranda such as those excerpted above. Sec. 301.6110-2(a),
Proced. & Admin. Regs.
As to the actual merits of the case, section 413(b)(7)
provides that "Each applicable limitation provided by section
404(a) shall be determined as if all participants in the plan
were employed by a single employer." Section 413(b)(7) also
provides that anticipated employer contributions are to be
determined in a manner consistent with the manner in which actual
contributions are determined.
In the prior proceeding petitioner argued that under section
413(b)(7) its contributions were within the deductible limits of
section 404(a) because the anticipated contributions for all of
the CBA plans to which petitioner contributed for their
respective plan years did not exceed any maximum deduction
limitation under section 404(a). But petitioner's own
contributions, if the so-called grace period contributions are
included, as petitioner insists they should be, substantially
exceeded its anticipated contributions. In our Opinion we stated
that since section 413(b)(7) requires that the computation of
anticipated contributions be consistent with actual employer
- 8 -
contributions, a taxpayer (petitioner included) may not
arbitrarily expand its own deduction limitation for any taxable
year by the simple expedient of deducting actual contributions
that are inconsistent with its anticipated contributions. Lucky
Stores, Inc., & Subs. v. Commissioner, 107 T.C. at 14. If any
one employer-contributor to a multiemployer plan could expand its
deduction limitation by this method, all could do so, a result
not intended by section 413(b)(7). Nowhere in any of its moving
papers does petitioner attempt to address this point.
Petitioner cites Airborne Freight Corp. v. United States, 76
AFTR 2d 95-7497, 96-1 USTC par. 50,004 (W.D. Wash. 1995), as
being the only other decision to consider the issue herein.
Airborne Freight Corp., however, is factually distinguishable
from the instant case. Our Opinion took into account testimony
by the plan administrator that she customarily determined the
minimum funding standards on an annual basis with reference to
hours worked by covered employees before the year closed. This
testimony was probative that the payments in question, insofar as
they were based on wages earned after the year's end, were not
treated in the same manner that the CBA plans would treat a
payment actually received on the last day of the taxable year.
See Lucky Stores, Inc., & Subs. v. Commissioner, 107 T.C. at 13-
15; cf. Rev. Rul. 76-28, 1976-1 C.B. 106. The order granting
plaintiff's motion for summary judgment in Airborne Freight
- 9 -
Corp., on the other hand, made no mention of whether testimony to
a similar effect was received in that case.
Furthermore, the District Court in Airborne Freight Corp.
did not directly address the question of the deduction
limitations of section 404(a), but instead relied almost entirely
upon section 404(a)(6) and Rev. Rul. 76-28 in holding for the
taxpayer. However, referring also to section 413(b)(7), the
District Court rejected the IRS argument, as phrased by the
court, "that by taking more of a deduction for the 1989 tax year
than had been anticipated, AFC interfered with other employers'
ability to estimate the plan-wide deductible limit". Airborne
Freight Corp. v. United States, 76 AFTR 2d 95-7497, at 95-7499,
96-1 USTC par. 50,004, at 83,015 (W.D. Wash. 1995). The court
went on to reason that because the taxpayer was late in filing
its 1989 tax return, it could not have interfered with other
employers' ability to calculate and claim their deductions. As
indicated by our Opinion and the discussion above, we
respectfully disagree with the District Court's analysis in that
respect.
A final word. We emphasize that what petitioner seeks to
obtain by its one-time bunching of 19 or 20 months of
contributions in a single year is a permanent tax deferral. This
concept is explicitly spelled out in an attachment to the
Declaration of Richard E. V. Harris, in the following words:
"Thus, assuming a [taxpayer] double extends its Federal income
- 10 -
tax return, it may be possible to realize a one-time tax savings
[sic] to the extent of the tax benefit on nine months of
contributions to the plan". (Obviously, the bunching technique
could not be applied in any subsequent year because to do so
would require double counting of a bunched contributions.) For
the reasons already articulated, we do not believe the limitation
of section 413(b)(7) permits the accelerated deduction of the
"[eight or] nine months of contributions" sought by petitioner in
this case.
For the above reasons,
An Order will be issued
denying petitioner's Motion
and the Judicial Notice Motions.